Wage is determined by the amount of wages fund and the total number of labourers. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads. Principles of political economy, with some of their applications to social philosophy. How are wages determinedtheories of wages determination. Wages, thus, cannot rise unless either the wage fund increases or the number of workers decreases but since the theory takes the wage funds fixed, wages could rise only by a reduction in the number of workers. His basic assumption was that wages are paid out of a predetermined fund of wealth which lay surplus with wealthy persons as a result of savings. The wage fund doctrine is a concept from early economic theory that seeks to show that the amount of money a worker earns in wages, paid to them from a fixed amount of funds available to employers each year, is determined by the relationship of wages and capital to any changes in population. According to adam smith, the demand for labour and rate of wages depend on the size of the wages fund. This fund could be utilized for employing laborers for work. Pdf the classical theory of wages and its interpretations. Furthermore, the proponents of the wages fund doctrine had been unable to prove the. The theory of wages antonella stirati working paper n. This fund, he called, wages fund created as a result of savings.
Request pdf wages fund the wages fund doctrine was an important. This theory is developed by classical economist named j. It would appear, therefore, that according to this theory efforts of trade union to raise wages would prove full. Even if this problem is solved by introducing a wage fund theory, this theory cannot, however, be traced in the classical economists. Wages fund theory this theory was developed by adam smith 17231790. After 1865 the wages fund theory was discredited by w.
The wagefund doctrine is a concept from early economic theory that seeks to show that the amount of money a worker earns in wages, paid to them from a fixed. Wage fund theory of wage this theory is developed by classical economist named j. His theory was based on the basic assumption that workers are paid wages out of a predetermined fund of wealth. Walker, all of whom argued that the demand for labour was not determined by a fund but by the consumer demand for products.
The wagefund theory held that wages depended on the relative amounts of capital available for the payment of workers and the size of the labour force. As per the wage fund theory, the wage level depends on the quantity of the wage fund and the number of people who are employed. A dissertation in economics submitted to the graduate faculty of texas tech university in. Subsequent classical economists gave great prominence to theories of value in their works. Wages increase only with an increase in capital or a decrease in the number of workers. In short, we can say, wage fund is that amount of floating capital which is set apart by employers for paying wages to the labor. Taussig, in his classic work on the wages fund, correctly iden. Wage fund refers to the amount of capital that an employer keeps for paying wages to labor. Smith said that the demand for labour could not increase except in proportion to the increase of the funds destined for the payment of wages. According to him, the employers set apart a certain amount of capital to pay wages for labourers. The average wage rate is determined by dividing the wage fund by the total number of workers employed. A refutation of the wages fund theory of modern political economy as enunciated by. The wage fund is distributed among the workers employed. According to mill, wage level is determined by wage fund and the number of workers employed.